Have people stopped listening?

Oliver Lamb, Deputy Editor, discusses the decline of Spotify

WHILE Spotify the social phenomenon goes from strength to strength, Spotify the business has hit a rough patch. On 23rd January the company’s co-founder and chief executive, Daniel Ek, announced the layoffs of about 600 employees, or six per cent of the workforce. Spotify lost €430 million on revenues of €11.7 billion in 2022, a year in which its operating expenditure grew twice as fast as its revenues. Its stocks have fallen by 70 per cent from their peak in February 2021.

SPOTIFY LOST €430 MILLION ON REVENUES OF €11.7 BILLION IN 2022, A YEAR IN WHICH ITS OPERATING EXPENDITURE GREW TWICE AS FAST AS ITS REVENUES

It may be some consolation that — as Ek noted — the entire tech industry has been struggling. Amazon, Meta and Twitter are just the biggest names to have made cuts. In part it is a hangover from the pandemic: as the world went online, tech firms went stratospheric, and they hired. Over-hired, as it turns out, and now they are shedding the excess. Ek admitted to making the same mistake. Alongside this, wider economic turmoil has led to a fall in the advertising revenues that are crucial for the tech sector. Ek said that Spotify was less dependent than others on advertising, and it is true that 85 per cent of its revenue comes from its paid premium service. But the company has bet big on podcasts, a sector that relies heavily on advertising.

Which brings us to Spo tify’s own original prob lem — the billions it has spent on its own original podcasts. Chief content of ficer Dawn Os troff, who led the podcast strategy, left her role in January. She was responsible for shows featuring Prince Harry and Meghan Markle, the Obamas, Kim Kardashian and Joe Rogan (sadly not all at once). She also acquired the podcast firms Gimlet and Parcast, although staff at both companies were laid off in October.

In theory, the move into podcasting was a sound one for a company whose main business is surprisingly unprofitable. Although Spotify now has 489 million active monthly users, the rights-holders of the music on the platform get 70 per cent of the company’s revenues.

Speaking to analysts and investors about the podcasting strategy, Ek said that he would do it again. However, he admitted that he has overinvested given the uncertainty in the market. The podcast industry is slowing down: according to Listen Notes, the 729,495 new podcasts in 2021 were joined by 219,805 in 2022. Ek said that Spotify would aim to become more selective and thriftier in its investments. Aside from that and the layoffs, Ek has reorganised Spotify’s leadership with a view to becoming more efficient. Meanwhile, subscription prices are likely to rise, as Ek, back in October, warned would happen. That could lose him customers, although a music industry executive who spoke to The Times expects it to make little difference.

ASIDE FROM THAT AND THE LAYOFFS, EK HAS REORGANISED SPOTIFY’S LEADERSHIP WITH A VIEW TO BECOMING MORE EFFICIENT

489 million users is not a statistic to be sniffed at. It is 20 per cent up on last year’s figure, exceeding Spotify’s expectations. Although that may not generate profit on its own, the core business is just that — the core, the foundation on which everything else is built. To that end, marketing campaigns in India and Indonesia have been a worthwhile investment. So too may be Spotify’s expansion into audiobooks. Gloom about Spotify’s difficulties, such as they are, should be tempered by the knowledge that they were, to some degree, expected. For years executives have openly placed investment above profit. That is now changing and the company expects profitability to improve this year. There is, then, plenty of cause for Spotify to be optimistic about its future, despite the present turbulence.

Joshua Hughes, Editor, looks at the expanding issue of 5G in the UK 5G in the UK

SINCE its introduction, 5G has been a contentious issue in the UK. Dogged by conspiracy claims across the world suggesting it could cause coronavirus infection, some have gone as far as to vandalise 5G masts with a 2020 article in The Guardian, suggesting that at least 20 UK phone masts had been damaged as a result of the false claims.

But what actually is 5G? Firstly, its core purpose is to speed up internet connection and improve download and upload speeds. However, 5G is not solely about internet speed, 5G also offers greater capacity, enabling thousands of devices in a densely populated area to be connected at the same time. 5G also ensures a reduction in latency (which is the time between telling a wireless device to carry out an action and that action being completed) — this therefore leads to fewer delays.

5G has continued to spread in the UK, albeit at an extremely slow pace. It is now in most major cities but is struggling to break into rural areas. The recent rejection of a 16m mast in Cheltenham is just the latest example of local residents blocking the expansion of 5G in the UK. It is certainly a difficult scenario for some — as modern day technology advances, it threatens the often picturesque setting of the countryside and smaller communities.

An interesting development in the pursuit of giving millions living in rural areas access to greater internet speeds is a new trial launched between BT (EE) and Stratospheric Platforms (SPL) which aims to utilise High- unable to be managed any longer as a result of US sanctions on its supply chain.

Altitude Platform station (HAPS) aircraft in order to extend 5G coverage into rural areas. While the use of drones is nothing new, they are normally only used in the event of emergencies such as natural disasters or significant network outages. This could potentially be a way to circumvent the issue of ruining the image of the British countryside. However, another threat which is much more significant is the danger posed by foreign influence in UK communications systems. It was announced by the government in 2020 that all Huawei equipment would be banned in the UK, with the deadline for the removal of equipment set for the end of 2027. The purchase of new Huawei 5G equipment was also banned after 31st December 2020. Digital Secretary Oliver Dowden stated that “By the time of the next election we will have implemented in law an irreversible path for the complete removal of Huawei equipment from our 5G networks”.

The future of 5G is at a crossroads at this point in time. On one hand, the technology is advancing; on the other, the new systems introduced are able to be manipulated by external actors, providing significant amounts of personal data to foreign threats. The possible ban on TikTok is another example of this, highlight- ing that data and privacy should be at the very top of Western leaders’ priorities and should be placed ahead of entertainment and greater internet speeds. As the inevitable increase in 5G coverage continues to take shape across the UK, the need for maintaining security and privacy has never been greater and it looks like this will be a continuing trend for many years to come.

The total ban on Huawei 5G products in the UK came as a result of national security concerns and guidance from the National Cyber Security Centre (NCSC) that the security of the company’s products was

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